Last year, Vandalay Industries had $300,000 in taxable income from its operations before the following: $40,000 in interest expense, $10,000 in interest income, $30,000 in dividends paid and $20,000 in dividend income. Assuming that 50% of dividend income is taxable and a 25% tax rate, what was the company's tax liability for the year?
A. $70,000
B. $79,190
C. $90,890
D. $62,500
E. $84,560

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Parrain Parrain · Answer 1 · 2020-10-22T03:40:20+02:00

Answer: A. $70,000

Explanation:

The tax liability will be computed on the total income that is taxable.

Total income = Taxable income - Interest expense + Interest income + taxable dividend income

= 300,000 - 40,000 + 10,000 + (50%* 20,000)

= 300,000 - 40,000 + 10,000 + 10,000

= $280,000

Tax liability = 25% * 280,000

= $70,000

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tallinn tallinn · Answer 2 · 2022-02-28T09:23:24+01:00

The tax liability will be computed on the total taxable income.

Formula of Total income is = Taxable income - Interest expense + Interest income + taxable dividend income.

Then = 300,000 - 40,000 + 10,000 + (50%* 20,000)

After that = [tex]300,000 - 40,000 + 10,000 + 10,000[/tex]

Now = $[tex]280,000[/tex]

Then the Tax liability is = 25% * 280,000 = $70,000

Thus, the correct option is "A" $70,000

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